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London’s Position as International Financial Center at Risk

Almost one-fourth of Britain's national income is earned in and around the city of London. Much of the money comes from international businesses based there.
But the British vote to leave the European Union means London could lose its place as Europe's leading business center.

As part of the European Union, Britain has rights to sell its services without tariffs in many countries across the continent. The EU currently has 28 member states, and it serves a market of 500 million people.

But when Britain officially leaves the bloc, London-based businesses will likely lose their tax-free access to the single EU market. As a result, some banks have already said they may move their operations to the European mainland.

Slater says the new government in Britain must negotiate for businesses to have continued access to the single market.David Slater is with the company London & Partners. Its goal is to strengthen London's image overseas and help London-based businesses work with foreign partners.

But some European leaders say Britain cannot have special economic ties with the European Union without permitting freedom of movement. They say people from EU member states should have the right to come freely to Britain.

Concern over immigration was the main issue that drove the "Leave" campaign to victory in Britain's Brexit vote.

What city will take London's place?

With the possibility that London will lose its special ties to the EU market, other cities are eyeing its position as Europe's leading financial center. The list of cities that want to replace London includes Paris, Berlin and Amsterdam.

In France, government officials recently spoke of "rolling out the red carpet" to businesses fleeing Brexit. They promised to make taxes for French expatriates the most favorable in Europe. The word "expatriate" is used to describe people who live outside their home country.

In Berlin, people see a chance to expand the city's technology industry. Berlin is already Europe's second biggest tech city after London. And, the prices for housing and offices are much less costly there.

Lukas Kampfmann is with a business called Factory Berlin. The group is home to high-tech companies, including the music website Soundcloud.

"With Brexit, London has more or less taken itself out of the race," Kampfmann said. "And we do believe that over time the advantage of Berlin will grow and more tech start-ups will come to Berlin."

Then there is Amsterdam, in the Netherlands. The New York Times newspaper recently rated Amsterdam as best placed to steal London's position. The paper noted that Amsterdam has international connections, an English-speaking population and appeal for expatriates.

But London's supporters still say their city will remain number one.

David Slater of London & Partners says the reason is because the businesspeople working in London want to stay there.